India's current account deficit decreases to 0.2% of GDP in Q4FY23 as trade gap shrinks

Reserve Bank of India (RBI) on Tuesday said that India’s current account deficit showed a significant reduction in January to March Quarter.

According to a press release by RBI, the reduction was primarily driven by a decrease in the trade gap and an increase in services export.

In the fourth quarter of the fiscal year 2022/2023, the current account deficit stood at  $1.3 billion (Rs 10,400 crore) or 0.2 percent of GDP, compared to a revised deficit of  $16.8 billion (Rs 134,400 crore) or 2 percent of GDP in the previous October-December quarter.

The data also revealed that in the same quarter of the previous year, the deficit was $13.4 billion (Rs 107,200 crore)

"The sequential decline in CAD in Q4:2022-23 was mainly on account of a moderation in the trade deficit to $52.6 billion (Rs 4,20,800 crore) in Q4:2022-23 from $71.3 billion (Rs 5,70,400 crore) in Q3:2022-23, coupled with robust services exports," the RBI said in the release.

Net services receipts increased, both sequentially and on a year-on-year (y-o-y) basis, on the back of a rise in net earnings from computer services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $28.6 billion (Rs 2,28,800 crore), up by 20.8 per cent from their level a year ago.

Net outgo on the primary income account, largely reflecting net income payments on foreign investment, increased on a year-on-year basis, while showing a marginal decline sequentially.

In the financial account, net foreign direct investment (FDI) at US$ 6.4 billion (Rs 51,200 crore) was higher than US$ 2.0 billion (Rs 16,000 crore) in Q3:2022-23, although lower than a year ago (US$ 13.8 billion).

A Reuters survey of 22 economists indicated that the current account balance in the March quarter likely recorded a surplus of $3.3 billion (Rs 26,000 crore) or 0.4% of GDP.

The survey forecasts varied, ranging from a deficit of $5 billion (Rs 40,000 crore) to a surplus of $7.8 billion (Rs 62,400 crore).

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